• Braxton Hoare

A Brief History Of Money

For much of history, people have found methods of exchanging value with one another. Whether that be by trading food, resources, or even exchanging our modern coins or paper money. Strangely, everyone today uses money as a source of value, although many people don't actually know how it came to be used at all. 

Prior to the first form of currency, implemented about 5000 years ago, many people traded with one another, trading different things such as spices, food, or precious metals. However, this method was very ineffective as it required people to carry around large items in order to make any exchange of value. It was clear that there was a need for an easier method. The Mesopotamian shekel was just this, these coins were made out of gold or silver, something that already held great value. In essence, using these coins in a trade was the same thing as trading any gold or silver, and that's why it worked. This coin standard became the primary way people would exchange goods, of course the coins themselves changed as new rulers issued them with their own shapes and symbols.

The next major development for currency would not happen until hundreds of years later. Banks offered a secure place to hold the gold that wasn't necessary to carry around. And for quite a while that was all the banks were really good for. The change towards bank-dominated currencies had not come overnight. Rather it was a slow and tenuous process over decades. Banks would offer to pay their customers interest on their deposited gold in order to convince new people to use their service. Over time these systems gained a reputation for being the safest way to manage wealth, and consequently, people became confident that when they exchanged a product for a banknote, that they would be able to exchange this note for real gold. This was the first time the primary source of value exchange was not directly a valuable resource on its own.

Cut forward to near modern-day, in the year 1971 President Richard Nixon took the United States Dollar off the gold standard. This was a big deal, and at the time some people believed the value of the dollar would fall to zero. Today we know that this didn't happen, as we still use these currencies today. The value of this money is no longer backed by anything tangible, rather the dollar was already so heavily used that its value was maintained from the fact that everyone was already accepting it, and trusted that others would continue doing the same. 

Of course, as we know, now digital banking and online payments are options as well and money has even branched into credit cards and debit cards, with the invention of magnetic strips and eventually tap chips. These cards were even slow to be adopted as initially, most retailers wouldn't accept them. It took a large push from banks to get them in people's hands before anyone actually began using them instead of cash. Banks would even give out prepaid credit cards to an entire neighborhood in an effort to get these cards in people's hands. It's very difficult to convince people they need a new technology when it comes out, so giving people every incentive to begin using it is necessary.

 Now new cryptocurrencies are threatening to replace our current systems entirely, and just like with what came before they are suffering from slow adoption. People don't see a need for crypto, and likely won't for many years. However, these cryptocurrencies are offering immense rewards to those who jump in early. Only time will tell if crypto coins become the new standard or if they are doomed to die, remembered only as a fad of the early 2020s.

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